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Coal not the panacea for poverty in Africa

Cheap coal-fueled electricity is touted by miners and politicians as a way out of poverty for developing nations, but apparently Africa hasn't been listening.

Indeed the booming African electricity market has an "everything but coal" approach, US financial group Citi says.

In a research note reinforcing its bearish outlook on the commodity, Citi said that a new International Energy Agency outlook on coal is at odds with the view of BHP, US coal producer Peabody and the Minerals Council of Australia that the commodity would play a big role in reducing energy poverty in developing countries.

It's a view that's been echoed by Prime Minister Tony Abbott. Speaking at the opening of a coal mine last month, Mr Abbot said "coal is good for humanity, coal is good for prosperity, coal is an essential part of our economic future, here in Australia, and right around the world".

But Citi disagrees.

 "While the [IEA] outlook is clearly wildly uncertain, it leads us to question whether coal will in fact play as significant a role as the coal industry may be suggesting in lifting developing nations out of energy poverty," its note says.

Citi's assessment of the US-China climate change agreement signed recently was that it would reduce worldwide coal demand by $US1.6 trillion ($1.87 trillion) during the next 15 years. Coal, in its metallurgical and thermal forms, is Australia's second-biggest mineral export after iron ore.

The recently released World Energy Outlook 2014 by the IEA supported Citi's view, the financial group said.

"Despite coal industry optimism about the role of coal in alleviating energy poverty in regions such as sub-Saharan Africa, our interpretation of WEO-2014 almost suggests an "everything-but- coal" approach," the Citi paper said.

The IEA said African energy demand from coal in 2012 was estimated at 105 million tonnes of oil equivalent (Mtoe). By 2040, this would rise to 164 Mtoe.

However, as a share of the total energy pie, coal would go from producing 56 per cent of Africa's energy needs in 2012 to just 27 per cent by 2040.

Most of the projected coal growth would occur in South Africa, Citi said. Hydro, gas and a suite of renewables would meet demand elsewhere on the continent. Furthermore, mini-grid or off-grid systems could provide the most viable access to electricity for the large rural population that is distant from power grids, it said.

Source: www.smh.com.au